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This ain't Aubrey McClendon. (Photo credit: Wikipedia)

Secret hedge funds, off-balance-sheet financings, big perks for directors, sweetheart drilling deals and giant non-recourse loans for Chief Executive Aubrey McClendon -- it all means that "crony capitalism has been alive and well," says John Olson. "History seems to be repeating itself in just another way."

Olson ought to know. He uncovered Enron. Back in the 1990s Olson, a veteran energy industry analyst, was a lonely voice in the wilderness; he was skeptical about Enron for a decade before its collapse. He became a target of Enron's Ken Lay, and lost his job at Merrill Lynch because he refused to go bullish on the company. He subsequently worked at Sander Morris Harris, ran a hedge fund, and now, at 69, handles investments for friends and family.

So what's his take on Chesapeake? Olson quotes philosopher Fredrich Hegel, "The only thing we learn from history is that we don't learn from history."

For the most part, he says, the Enron comparison doesn't stand up to scrutiny. Enron was a sham company with few hard assets and pretend profits generated by tortured financial chicanery conducted via hundreds of off-balance sheet entities. Chesapeake, on the other hand, deals in real assets. Leases on property, oil and gas that it drills out of the ground with its own rigs and pipelines.

But there are some echoes between the companies. And especially in the financial finagling that Chesapeake has become known for (and that we've written about at length in past articles), it appears that Chesapeake has learned a few lessons from Enron. (Reuters recently explored the Enron/Chesapeake comparison here.)

"Enron was all paper assets. They had 2,832 off-balance-sheet entities. We never saw inside those things until after the collapse," says Olson.

Clever traders at Enron and El PasoEnergy created many financing tricks that in the years since have become part of the financing trade: derivatives, synthetic credit default swaps, deals financed with little or no equity. "Enron was the past master,
but the game just resurfaced," says Olson, referring to wild west deal making that inflated the housing bubble and led to the collapse of Lehman Bros. "They took it to a $3 trillion exposure."

That makes him a little concerned about Chesapeake, which has long trumpeted its active trading and hedging strategies. "You don't know what they have. I know that I don't know."

"Chesapeake has valuable assets, but they have a financial dynamic that only works in the fourth dimension: they need $12 billion when their cash flow is just $2 billion."

Chesapeake has outspent its cash flow every year for the past decade -- forging ahead with acquisitions of land and drilling more wells than any operator -- convinced that it will be able to find others to finance its growth. The strategy worked pretty well, as McClendon and long-time friends like Ralph Eads, chairman of Jefferies & Co. (and former head of energy trading at El Paso) lined up willing buyers among foreign governments and orchestrated a string of off-balance-sheet vehicles like the Volumetric Production Payments. McClendon has been able to make Chesapeake's ends meet, because, as Olson says, he can rely on Greater Fool Theory. "All it takes is one buyer."

Over the years McClendon has convinced the likes of Total, Statoil, Cnooc, BHP Billiton Petroleum, BP, ExxonMobil and more to keep his ship afloat by buying Chesapeake assets. But today with natural gas prices so low, it has become a buyer's market. And all the buyers know that with Chesapeake on the ropes they ought to be able to extract a good price.

"If gas were $6 or $7 they might have been able to perpetuate themselves longer," says Olson.